3.3.6. Pillar Assessment
The Financial Regulations require that the candidate entrusted entity demonstrates a level of financial management and protection of the EU financial interests equivalent to that of the Commission. This is achieved by carrying out an ex-ante examination of the candidate entrusted entity, so-called Pillar Assessment. The Pillar Assessment is composed of five items (pillars):
(1) effective and efficient internal control system;
(2) accounting system providing accurate, complete, reliable and timely information;
(3) independent external audit performed in accordance with international auditing standards by an audit service functionally independent of the candidate delegatee;
(4) rules and procedures on procurement, grants and financial instruments - on the last see section 3.8. on Regional Blending Facilities) that comply with the principles established by the Financial Regulation (Article 38 RAP) and are hence equivalent to its rules.
(5) pillar assessment or control equivalent to the Commission's performed by the candidate entrusted entity on its subdelegatees - see section 3.10. on Subdelegation.
The Pillar Assessment is carried out by a service provider (auditor) under a framework contract of the Commission following terms of reference established by DEVCO.R2 “Audit and Control” which manages the procedure at the request of the DG DEVCO Contract, Finance and Audit unit (UFCA). A request from EU Delegations shall be also processed through that unit).
The Pillar Assessments consists in assembling relevant factual information from the candidate delegatee and assessing it against a benchmark. The benchmarks are as follows:
Internal control system: best practices and Commission's standards
Accounting system: international accounting standards;
External audit: international auditing standards;
Procurement and grant rules and award procedures: procurement and grants principles and rules of the Financial Regulation applicable in external action.
The Pillar Assessment will result in an opinion of the auditor on the compliance of the rules, procedures and systems of the candidate entrusted entity with the benchmarks. The outcome is positive if the opinion considers that the rules, procedures and systems of the candidate are equivalent to those of the Commission; in that case the delegatee may use its own rules, procedure and systems, subject to the specific obligations agreed in the delegation agreement. If not, the opinion will result in a series of recommendations to remedy the non-equivalence. The non-equivalence can mean that the deficiencies are so serious that no delegation is possible until remedy is provided. Other recommendations can be followed up on by either changes in the rules, procedures and systems of the candidate delegatee that will be re-examined by the auditor, or by remedial clauses will be inserted into the delegation agreement. This demonstrates the need to identify the candidate delegatee as soon as possible in order to trigger the Pillar Assessment on time.
Because of the entry into force of a new Pillar Assessment pursuant to the new Financial Regulation No 966/2012, there will be a transitory period under which delegation agreements may be signed with entities which were positively assessed under the old Pillar Assessment based on the old Financial Regulation No 1605/2002. The template Action Document and FinDec&AAP/M contain provisions for that purpose (so-called “presumption of conformity”). However, the old Pillar Assessment report has to be read in order to establish the degree of equivalence of the candidate delegatee's rules, procedures and systems. This “presumption of conformity” is based on the experience of the Commission of a long-standing and problem free cooperation with the delegatee and the consequent assessment of a low level of risk. In order to rely on the presumption of conformity, authorising officers by subdelegation have to make sure that the pillars exist in the candidate delegatee without any major deficiencies. This requires that authorising officers request the information on the candidate's accounting, audit, internal control and procurement or grant procedures, and make a preliminary review of the information received, so as to ensure that no major issues exist. Moreover, presumption of conformity may only be used if the Pillar Assessment has been launched at the time the FinDec&AAP/M is adopted.